Legacy Planning: 5 Tips for Getting Started

Shannon Nelson |

What is legacy planning?

Legacy planning is the process of creating a financial strategy that ensures your wealth and core values are transferred to the next generation in the most tax-efficient and secure method possible. There is no cookie cutter approach to legacy planning; therefore, each individual’s goals, intentions, and financial suitability, are taken into consideration to create a unique and optimal plan. The legacy planning conversation typically begins with a discussion of the following topics:

  • Financial goals and needs
  • Core values and family belief systems
  • Beneficiaries
  • Intentions for the distribution of your assets during and/or after life
  • Any planning and document preparation you have already done to prepare your legacy
  • Investment account types and size of estate

In essence, legacy planning is the future of your financial life, and the stakes are higher now than ever before. Over the next 30 years, it is estimated that more than $30 trillion will be passed from one generation to the next. This will be the largest intergenerational wealth transfer in American history.

Are you ready?

Many people are not, but it is never too late to start the conversation. Below you will find 5 tips on starting to plan your financial legacy.

1. Plan your estate

It is a common misconception that estate planning is only for the extremely wealthy, that is simply not true. Estate planning helps you decide how your assets are distributed during your lifetime and at the time of your death. Planning your estate not only helps avoid probate, but can help maximize your wealth and minimize taxes and other expenses.

Estate planning is an essential part of legacy planning, because it helps prepare you for the unexpected. In addition to defining the transfer of property, estate planning allows you to define and prepare healthcare decisions. Estate documents can help you appoint guardians for minors, establish your last wishes, and appoint someone to make healthcare decisions if you are unable. It is important to plan for these situations while you are still in control of your legacy, and avoid the confusion and regret when it’s too late.


2. Have the inheritance conversation

Inheritance planning is not always an easy topic to discuss. Inheritance planning is often overlooked because of lack of financial planning, insufficient documentation, poor communication, or misguided expectations between intergenerational expectations and reality. However, this does not have to be the case. The earlier you start the inheritance conversation with your beneficiaries, the easier it is to find a plan that aligns with your goals and objectives, is consistent with your values, and is tax efficient for inheritors.


3. Plan ahead for education

As the cost of higher education continues to rise each year, it is important to plan ahead. For a child born in 2018, the projected total cost of a public university is $215,444 and the projected total cost of a private university is $487,004.  While the increase in tuition and other associated costs are high, there steps you can take to prepare. Common tools for education planning include 529 Plans, UGMA/UTMA accounts, as well as Coverdell savings accounts.

Further, it is important to set expectations and communication with your children about education planning. To start, have a discussion with your children long before you begin applying for college. It is important that expectations are understood between both you and your children in regard to cost, location, and commitment to their higher education program.


4. Discern which charities/organizations to support

For many individuals and families, legacy planning is not solely about money; rather, legacy planning is focused on making an impact. Charitable giving is the part of legacy planning that helps balance the emotional rewards of giving with the preservation of wealth. There are several strategies to accomplish this goal: Donor Advised Funds, Foundations, and Charitable Remainder Trusts to name a few. These investment vehicles help maximize your charitable impact, while maintaining a strategic and tax-efficient plan of your assets.

However, for many people the most important part of charitable giving is discerning the charities and organization to support. It is important to find charities, foundations, organizations, etc. that you are passionate about and whose mission and values align with your own. To start, consider creating a personal mission statement for your legacy goals to help guide you through this process.


5. Plan with Millennials in mind

One of the most important factors contributing to building a legacy is time. Through saving and investing at an earlier age, younger investors are able to take advantage of compounding those investments over time, and are at a point in their lives in which a little planning can significantly impact their legacy. Millennials’ lives have been shaped by persistent instability ranging from the dot-com bubble, 9/11, the Great Recession, and a number of global catastrophes. These events have led Millennials to have general distrust of financial advice and investing and has led Millennials to invest more conservatively than they should. In a recent study 82% of millennials said their investment decisions are influenced by the financial crisis, as compared to 39% and 13% for Generation X and Baby Boomers respectively.

The attitude and mindset of Millennials is significant because as the single largest generation in the United States, Millennials are set to inherit the majority of the assets transferred in the next 30 years. Therefore, it is essential to have family discussions about inheritance, investing for future goals, and general financial education, with a family financial advisor or other trusted professional.


Authored by Michael Bogard, CFA on May 31, 2018

About the Author:  Michael Bogard, CFA is a Business Development / Client Relationships Senior Associate at Heck Capital Advisors. Michael earned the right to use the Chartered Financial Analyst® (CFA®) designation after completing the program in 2018, fulfilling the work experience requirements, and gaining acceptance as a member of the CFA Institute. The Chartered Financial Analyst® (CFA®) charter gives a strong understanding of advanced investment analysis and real-world portfolio management skills. CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.